Is the Transportation & Logistics sector going digital too slowly?

August 23, 2016

By Jonathan Kletzel, US Transportation & Logistics Leader, PwC

A digital transformation is now underway in the transportation and logistics (T&L) sector. However, T&L companies are not moving as fast as others in related industries. In our interviews with 186 senior executives in 26 countries, only 28% say they’ve reached an advanced level of digitization. But they have high expectations: 71% said they will get there by 2020. As with the other sectors in our survey, T&L companies think Industry 4.0 initiatives will reduce operational costs and increase revenue growth.

They are investing in the customer experience. Somewhat surprisingly, T&L companies are making investments in digital operations to the tune of 5% of annual revenue, which is in line with other sectors in our survey. They are focusing primarily on digitizing the customer interface, reflecting the importance of mobile to this sector. Companies are using mobile to personalize the passenger experience in transportation and make use of tracking and tracing in logistics. So it’s no wonder that in this area, 37% reported advanced levels of digitization. But only 21% say they are currently taking advantage of digitizing business models.

But they’re facing major challenges. When asked about impediments to digitization, half of the T&L respondents cited the absence of a digital culture and the right training as their single biggest challenge. They do not have robust organization and governance frameworks in place. More than a third (37%) said they rely on the ad hoc data analytics capabilities of individual employees. Another 23% have no significant data analytics capabilities, the highest percentage of all the sectors in our survey. Just over a quarter have embedded analytics into specific functions, and another 9% have a dedicated department.

Tying for second place (38%) in the list of challenges are unresolved questions around data security and privacy in connection with the use of external data and high financial investment requirements. The third top concern is lack of a clear digital operations vision and support/leadership from top management.

There’s a gap between vision and execution. Our survey shows that T&L companies are ahead of the pack in understanding the vital importance of data analytics. Half of the executives we interviewed view data analytics as important or very important to their companies today. When asked to look ahead five years, 90% assigned great importance to data analytics – the highest of all the sectors in our study. Yet, only 10% of transportation and logistics companies rate the maturity of their data analytics capabilities as advanced vs. 19% across the survey as a whole.

They need to invest to bridge the gap. Many of those who haven’t invested significantly in the past two years plan to step up investment in the coming five years. But just over a third of companies still expect to keep their future investment relatively low. This may make sense for some companies, such as small haulers. But, for most of the sector, which stands to gain a lot from digitization, inaction may be the wrong choice. Companies moving ahead with digitization may be gaining a significant advantage when it comes to positioning their offerings. And companies that wait, thinking they have time to invest, may find it difficult to catch up.